Andreas Halvorsen's Viking Global Portfolio: Express Scripts, Visa, CSX & More ~ market folly

Thursday, December 17, 2009

Andreas Halvorsen's Viking Global Portfolio: Express Scripts, Visa, CSX & More

This is the third quarter 2009 edition of our hedge fund portfolio tracking series. If you're unfamiliar with tracking firm movements via SEC filings, check out our series preface on hedge fund 13F filings.

After a brief hiatus we're back with our coverage of Q3 portfolios and today we'll cover Andreas Halvorsen's Viking Global. Halvorsen is a 'Tiger Cub,' or a progeny of legendary investor and hedge fund manager Julian Robertson of Tiger Management. (See the Tiger Cub 'family tree'). Halvorsen has taken what he learned/used at Tiger and added his own spice to the value oriented, yet growth at a reasonable price (G.A.R.P.) tolerable investment style. Viking employs a fundamental strategy, using a bottom-up process to pick stocks.

Halvorsen attended Williams College and received his MBA from Stanford and he has previously worked at Morgan Stanley and Tiger. In Alpha's 2008 hedge fund rankings, Viking was ranked #70 in the world. In terms of updates this year, we had covered Viking's investor letter from the second quarter where they were lagging the markets due to their short positions.

Keep in mind that the positions listed below were Viking's long equity, note, and options holdings as of September 30th, 2009 as filed with the SEC. We don't cover every single portfolio maneuver, as we instead focus on all the big moves. All holdings are common stock unless otherwise denoted.

Some New Positions
Brand new positions that they initiated last quarter in order from largest descending to smallest:
Express Scripts (ESRX)
Cigna (CI)
Flowserve (FLS)
AmerisourceBergen (ABC)
Citigroup (C)
Hewlett Packard (HPQ)
PepsiCo (PEP)
Autodesk (ADSK)
Halliburton (HAL)
RenaissanceRe (RNR)
MedcoHealth (MHS)
Rovi Corp (ROVI)
Ingersoll Rand (IR)
Smithfield Foods (SFD)
St Jude Medical (STJ)
Hospitality Prop (HPT)

Some Increased Positions
Positions they already owned but added shares to:
Ralcorp (RAH): Increased position by 7,208%, but overall less than 0.5% of their reported holdings
CSX (CSX): Increased position by 515.7%
Owens and Minor (OMI): Increased by 418%, but overall still under 1% of their long portfolio
Goodrich (GR): Increased by 254%
Apollo Group (APOL): Increased by 141.8%
XTO Energy (XTO): Increased by 119.5%
Franklin Resources (BEN): Increased by 114.2%
Visa (V): Increased by 92.5%
Sherwin Williams (SHW): Increased by 85.6%, but still only a small portion of their portfolio
Virgin Media (VMED): Increased by 56.7%
Davita (DVA): Increased by 49.6%
Tyco (TYC): Increased by 38.1%
CVS Caremark (CVS): Increased by 22.3%
JPMorgan Chase (JPM): Increased by 20.1%

Some Reduced Positions
Some positions they sold shares in but still own:
Qualcomm (QCOM): Reduced by 83.3%
Lender Processing (LPS): Reduced by 76.9%
Priceline (PCLN): Reduced by 66.8%
Walt Disney (DIS): Reduced by 59%
Ace (ACE): Reduced by 58.6%
Terex (TEX): Reduced by 58.3%
Goldman Sachs (GS): Reduced by 48%
Mastercard (MA): Reduced by 44.8%
DirecTV (DTV): Reduced by 38.7%
Bank of America (BAC): Reduced by 45.5%
Google (GOOG): Reduced by 44.6%
Owens Illinois (OI): Reduced by 25.6%
NRG Energy (NRG): Reduced by 21.8%

Removed Positions
Positions they sold out of completely:
Cognizant Technology (CTSH)
Career Education (CECO)
ThermoFisher Scientific (TMO)
Health Management (HMA)
Covidien (COV)
McKesson (MCK)
American Tower (AMT)
Molson Coors (TAP)
Community Health (CYH)
Coca Cola Enterprises (CCE)
Fifth Third Bancorp (FITB)
Colgate Palmolive (CL)
Popular (BPOP)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. Visa (V): 11.1%
  2. Invesco (IVZ): 8.2%
  3. JPMorgan Chase (JPM): 5.83%
  4. Franklin Resources (BEN): 5.08%
  5. Express Scripts (ESRX): 4.75%
  6. Apollo Group (APOL): 4.01%
  7. CSX (CSX): 3.98%
  8. Mastercard (MA): 3.54%
  9. DirecTV (DTV): 3.33%
  10. Goodrich (GR): 2.68%
  11. Google (GOOG): 2.55%
  12. Bank of America (BAC): 2.42%
  13. Cigna (VI): 2.18%
  14. Beckman Coulter (BEC): 2.09%
  15. AON (AOC): 2.07%

One of Viking Global's biggest purchases was a brand new stake in Express Scripts (ESRX) which they brought up to their 5th largest holding. What's interesting here is that Viking was adding in size to multiple names as they were undoubtedly helping the market rally fuel higher in the third quarter. Their most bountiful buys were in Visa, Franklin Resources, Apollo Group, CSX, and Goodrich Corporation, names that are all in their top 10 largest holdings. Their large purchase of CSX was of particular interest given that Warren Buffett's Berkshire Hathaway recently purchased all of fellow railroad Burlington Northern (BNI). Not to mention, the railroads (and CSX in particular) have been ripe with hedge funds as major shareholders previously.

Some notable names they sold completely out of in the third quarter include Cognizant Tech (CTSH), Career Education (CECO), and Thermo Fisher Scientific (TMO). They also sold off shares in the following names but they retained a position: They unloaded some Qualcomm which is notable because it was recently listed as one of the top 10 most popular stocks amongst hedge funds. Additionally, we note their Priceline sale because shares have been ramping higher over the past few months so we could assume they are locking in some profits.

Below are some graphical illustrations of the changes made to Viking Global's portfolio courtesy of Drew Robertson at Financial Research Station:

(click to enlarge)

And also:

(click to enlarge)

Overall, they were reducing their technology holdings on a quarter over quarter basis. They boosted their exposure to the services sector and kept financials exposure steady. Assets from the collective holdings reported to the SEC via 13F filing were $7.8 billion this quarter compared to $5.7 billion last quarter, so they put a meaningful amount of capital to work on the long side in US equities. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. Also, again please note that these positions are as of September 30th so two months have elapsed since this disclosure and they've undoubtedly shifted around their portfolio since then.

This is just one of the 40+ prominent funds that we'll be covering in our Q3 2009 hedge fund portfolio series. We've already covered Seth Klarman's Baupost Group Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Dan Loeb's Third Point LLC, David Einhorn's Greenlight Capital and John Paulson's firm Paulson & Co so check back daily as we'll be posting up a new hedge fund portfolios.

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